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American Express To Acquire Online Lender Kabbage
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American Express To Acquire Online Lender Kabbage

American Express announced plans to acquire financial technology company Kabbage.

Financial terms of the deal were not disclosed. However, Bloomberg reported last week that American Express (AXP) could pay as much as $850 for the lending company Kabbage. The deal is expected to close later this year.

The biggest credit card issuer for small business and consumers, said on Monday that the Kabbage deal, excluding the pre-existing loan portfolio, will allow it to “offer a broader set of cash flow management tools and working capital products to its millions of small business customers in the U.S.”

Last month, American Express reported mixed 2Q results, amid concerns that the economic recovery is stalling after a resurgence in coronavirus cases. The payments company reported earnings of $0.29 per share, topping analysts’ loss estimates of $0.11 per share. Revenues of $7.68 billion fell short of Street estimates of $7.9 billion.

Following 2Q results, BMO Capital analyst James Fotheringham lifted AXP’s price target to $100 (2.5% upside potential) from $96. The analyst boosted the company’s 2020 EPS forecast to $3.57 from $2.24 on lower expected provisions and operating costs. Nonetheless, he maintained a Hold rating on the stock, citing the company’s “hybrid” profile as a bank and a card network that makes an “awkward recommendation”.

Currently, the Street is sidelined on the stock. The Hold analyst consensus is based on 11 Holds, 5 Buys, and 3 Sells. The average price target of $102 implies upside potential of about 4.6%. (See AXP stock analysis on TipRanks).

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